Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $14.01 Variable cost per cake Ingredients 2.21 Direct labor 1.11 Overhead (box, etc.) 0.30 Fixed cost per month $4,156.00 Required: 1. Calculate Cove’s new break-even point under each of the following independent scenarios: a. Sales price increases by $1.50 per cake. b. Fixed costs increase by $515 per month. c. Variable costs decrease by $0.39 per cake. d. Sales price decreases by $0.60 per cake. 2. Assume that Cove sold 430 cakes last month. Calculate the company’s degree of operating leverage. 3. Using the degree of operating leverage, calculate the change in profit caused by a 15 percent increase in sales revenue.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Cove’s Cakes is a local bakery. Price and cost information follows:
| Price per cake | $14.01 | ||
| Variable cost per cake | |||
| Ingredients | 2.21 | ||
| Direct labor | 1.11 | ||
| 0.30 | |||
| Fixed cost per month | $4,156.00 | ||
Required:
1. Calculate Cove’s new break-even point under each of the following independent scenarios:
a. Sales price increases by $1.50 per cake.
b. Fixed costs increase by $515 per month.
c. Variable costs decrease by $0.39 per cake.
d. Sales price decreases by $0.60 per cake.
2. Assume that Cove sold 430 cakes last month. Calculate the company’s degree of operating leverage.
3. Using the degree of operating leverage, calculate the change in profit caused by a 15 percent increase in sales revenue.
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